Americans Own Fewer Cars Than Europeans, More Than Chinese

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August 20, 2012

We live in exciting times.

Cell phones and jet planes have made the world vastly smaller. The internet has radically changed the way we communicate and do business. And although poverty and disease remain huge problems around the globe, entrepreneurs, agencies, and governments are developing new arsenals of tools to improve lives.

But like all exciting times, this one brings its share of upheaval, too. Nowhere is that more evident than in developing countries like China and India, which boast rapidly growing populations of well-educated young people who have opportunities that their parents never dreamed of. The rise of the middle class that began in western Europe during the Renaissance has slowly filtered out to other cultures.

Intrigued by this phenomenon, the Carnegie Endowment recently tried to track prosperity around the globe, but researchers ran into a problem: no one could agree on a standard definition of "middle class". And so, the Endowment did some digging and found a new barometer of national prosperity: the number of cars on the road.

The Endowment is quick to point out that this metric works best in developing countries:

"Whereas in advanced countries, even households classified as poor own cars, in developing countries, car ownership is almost synonymous with at least middle-class status. It separates those with the ability to purchase nonessentials from the wider population. Moreover, car statistics are generally reliable and frequently updated and contain information by type of car that can be used to further segment the middle class."

So what did the Carnegie Endowment find? Here are a few major takeaways:

If car ownership is, in fact, a useful metric, far more families -- maybe even twice as many -- have entered the middle class than other economic stats would suggest. Of the six billion people who live in developing countries, the Endowment's Car Index suggests that 550 million to 600 million have entered the middle class.

Owning a car is roughly on par with owning other nonessential items, like computers and TVs. That's because in many countries, cars owned by households are exceedingly old and inexpensive. In India, for example, the average age of cars on the roads is 20 years -- far longer than America's 11 years. As a result, they're fairly inexpensive.

China now has around 34.4 million vehicles in circulation, and roughly 24 million of those were added between 2006 and 2010.

And yet, where vehicle ownership is concerned, Europen nations far outpace the rest of the world. Italy is more car-crazy than anywhere else on the planet, with nearly 600 passenger vehicles per 1,000 people. It's followed by Germany (510 per 1,000), France (just under 500 per 1,000), Spain (roughly 480 per 1,000), Japan (about 450 per 1,000), and the U.S. (439 per 1,000). China, by comparison, has 34 vehicles per 1,000 residents, and in India, the figure is closer to 12 per 1,000.

What's it all mean?

There's no doubt that the global middle class is growing, but if the Carnegie Endowment's Car Index is accurate, it's growing far more quickly than previously thought.

Ultimately, this will affect a wide range of things, especially in developing countries. Perhaps most notably, demand for nonessential goods will begin to climb, presenting opportunities and challenges to manufacturers. Environmentalists will be quick to point out that increased consumption will inevitably lead to increased waste and booming emissions from factories.

And that's not all. Hand-in-hand with rising prosperity come rising life expectancies. This will put demands on the medical and healthcare sectors, not to mention the food supply, which is already stretched pretty thin.

But of course, there's good news, too. A growing middle class often translates into a growing insistence on transparency in government, meaning that there's less opportunity for dictatorial regimes to flourish.

Just a little food for thought to kick off your work week. Feel free to share your own thoughts in the comments below.